LOGM 2017 Annual Report

utilization. Subsequent ownership changes as defined by Section 382 could potentially limit the amount of net operating loss carryforwards that can be utilized annually to offset future taxable income. As of December 31, 2017, the Company had foreign net operating loss carryforwards of $35.9 million, of which $18.7 million is related to the Company’s Hungarian subsidiary, which are not subject to expiration, and the Company has recognized a full valuation allowance against these carryforwards. The remaining $17.2 million of foreign net operating loss carryforwards are related to the Company’s Israel subsidiary. The Company expects to fully realize these net operating loss carryforwards prior to expiration. As of December 31, 2017, it is management’s assertion that the earnings and profits of foreign entities may not be reinvested in the overseas businesses indefinitely however, the outside basis differences in the international subsidiaries will be permanently reinvested. As a result of the U.S. Tax Act, the Company recognized a one-time mandatory transition tax of $14.8 million on cumulative foreign subsidiary earnings of $56.6 million. The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company and its subsidiaries are examined by various tax authorities, including the Internal Revenue Service in the United States. As of December 31, 2017, the Company remained subject to examination in the following major tax jurisdictions for the years indicated: Major Tax Jurisdictions Open Tax Years United States (Federal) . . . . . . . . . . . . . . . . . . . . . . . . . . 2014-2017 United States (State) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013-2017 Hungary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2011-2017 Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012-2017 The Company incurred expenses related to stock-based compensation for the years ended December 31, 2015, 2016 and 2017 of $26.5 million, $38.4 million and $67.3 million, respectively. Accounting for the tax effects of stock-based awards requires the recording of a deferred tax asset as the compensation is recognized for financial reporting prior to recognizing the tax deductions. Upon the settlement of the stock-based awards (i.e., exercise, vesting, forfeiture or cancellation), the actual tax deduction is compared with the cumulative financial reporting compensation cost, and any excess tax deduction is considered an excess tax benefit. In 2015 and 2016, the excess tax benefit was tracked in a “windfall tax benefit pool” to offset any future tax deduction shortfalls and were recorded as increases to additional paid-in capital in the period when the tax deduction reduced income taxes payable. Historically, the Company has followed the with-and-without approach for the direct effects or excess tax deductions to determine the timing of the recognition of benefits for excess tax deductions. In 2015 and 2016, the Company recorded excess tax benefits to additional paid-in capital of $6.9 million and $2.3 million, respectively. On January 1, 2017, the Company adopted ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”) and recorded, using the modi- fied retrospective approach, a cumulative-effect adjustment to accumulated deficit of a credit of $4.9 million to record $6.8 million of previously unrecognized windfall tax benefits, partially offset by $1.9 million for the accounting policy election to account for forfeitures in compensation cost when they occurred. The Company recorded $2.7 million to additional paid-in capital for the differential between the amount of compensation cost previously recorded and the amount that would have been recorded without assuming forfeitures, partially offset by its tax effect of $0.8 million recorded to deferred tax assets. Upon the adoption of ASU 2016-09, the Com- pany, on a prospective basis, records the recognition of excess tax benefits and deficits in its provision from income taxes in the consolidated income statement and treats those amounts as discrete items in the period in which they occur. For the year ended December 31, 2017, the Company recorded a net tax benefit of $16.0 million related to excess tax benefits. 78